Employment policies and data

OECD Employment Outlook 2012: chapter summaries

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Chapter 1. Waiting for the Recovery: OECD Labour Markets in the Wake of the Crisis

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The economic recovery has been weak or uneven and some countries have fallen back into recession. This chapter examines the implications of the lack of a vigorous recovery for OECD labour markets. Its main findings are threefold. First, almost three years since the start of the economic recovery, economic growth has not been strong enough to make more than a small dent in the cyclical hike in OECD-wide unemployment. Second, there has been an increasing marginalisation of the jobless through an increase in the number of long-term unemployed and of discouraged workers leaving the labour force. Third, there is a growing risk that at least part of the cyclical increase in unemployment may become structural even if this has only materialised to a limited extent so far.

This chapter analyses the impact of selected labour market policies and institutions for labour market resilience, defined as the extent to which labour markets weather economic downturns with limited social costs. One of the main insights that emerges from this chapter is that policies and institutions that are conducive to good structural labour market outcomes also tend to be good for labour market resilience. In particular, co-ordinated bargaining institutions can contribute to both good structural performance and labour market resilience, while the intensive use of temporary contracts tends to be associated with both weaker structural outcomes and less resilience.

During the past three decades, the share of national income represented by wages, salaries and benefits – the labour share – has declined in nearly all OECD countries. The chapter examines the drivers of this decline, stressing the role played by factors such as increased productivity and capital-deepening, increased domestic and international competition, the reduction of workers’ bargaining power and the evolution of collective bargaining institutions. The decline of the labour share went hand-in-hand with greater inequality in the distribution of market income, which might endanger social cohesion and slow down the current recovery. Enhanced investment in education and use of the tax and transfer system can effectively reduce these risks.

A successful transition towards a low-carbon and resource-efficient economy will reshape the labour market in ways that create new opportunities for workers, but also new risks. The challenge for labour market and skill policies is to maximise the benefits from this transition for workers and help assure a fair sharing of unavoidable adjustment costs, while also supporting broader green growth policies. This chapter sheds light on these policy challenges and provides guidance for how they can best be met.